Regulation of Insolvency Practitioners (IPs)

Published Monday, September 9, 2019

This Commons briefing paper provides an outline of the current regulation of insolvency practitioners (IPs) and how to make a complaint. It also considers the Insolvency Service’s recent call for evidence on the current regulatory framework.

Insolvency is a regulated profession under the Insolvency Act 1986 (as amended), the Insolvency Rules 1986 (as amended), and the Enterprise Act 2002 (as amended). Only a licensed insolvency practitioner (IP) may be appointed in relation to formal insolvency procedures for individuals and businesses. This means that only a licenced IP can act as:

a liquidator,

an administrative receiver or administrator (in respect of company insolvencies), or

a trustee in bankruptcy (in respect of personal insolvencies)

In addition, only a licensed IP can advise on formal procedures in respect of all Company Voluntary Arrangements (CVAs) and Individual Voluntary Arrangements (IVAs). In carrying out their duties, IPs must comply with statutory requirements and follow best practice and ethical guidance.

The current regulatory framework has been in place since October 2015. All IPs must be licensed and regulated by a Recognised Professional Body (“an RPB”). Currently, there are five RPBs. Each is required to have proper procedures in place to ensure that a complaint made against an IP it authorises is properly investigated.

In October 2015, the Small Business Enterprise and Employment Act 2015 introduced new regulatory objectives intended to provide RPBs with a clear structure within which to carry out their regulatory functions. Importantly, the Act gave the Secretary of State the power to create a single, independent regulatory body in place of the current system of RPBs, should it be considered appropriate. This power expires in 2022.

On 12 July 2019, the Insolvency Service published a call for evidence on the current regulatory framework; it closes on 4 October 2019. This consultation starts the process to inform the government as to whether the regulatory objectives have had their intended impact or whether there is a need to make further changes, including whether to consult on a move to a single regulator.

This Commons briefing paper provides an outline of the current regulation of IPs. It provides information on how a complaint can be made against an authorised IP. At section 5, it also considers the Insolvency Service’s recent call for evidence.

It should be noted that insolvency is a devolved function in Northern Ireland, although in practice the regime is closely aligned with that of England and Wales. Insolvency is handled by the Northern Ireland Insolvency Service with oversight regulation carried out by the Department for Economy (DfE). Scotland shares the same corporate insolvency law as in England and Wales, but a different legal procedure applies to bankruptcy (known as ‘sequestration’). Bankruptcy and insolvency are handled by the Accountant in Bankruptcy in Scotland.